Privatization ends postal savings safe haven

Changes expected to prod depositors to consider money management

Will there be any changes in services at post offices under the just-started 10-year process of privatizing the postal system?

There may be few big changes in the initial stage. But individual investors will at least have to rethink where they should put their money because privatization deprives postal savings of the myth of safety backed by the government, analysts say.

Japan Post, the public postal service company, was split Monday into four firms under a holding company as the first step in the privatization process. The four units are in charge of mail delivery, postal savings, insurance and over-the-counter services.

But it has become easier to change postage rates, with only advance notice to the internal affairs and communications minister required, compared with the old requirement of approval from the minister.

One of the changes with the start of the privatization process is hikes in remittance commission rates due to the imposition of stamp taxes, which had not been imposed during the days of the public corporation.

Remittance commissions at post offices for payments of utility charges had been ¥30 regardless of the amount. Under the new system, commissions for transferring ¥30,000 or more in utility payments, for example, come to ¥240.

Commissions for the remittance of relatively small sums using money orders have risen to ¥100, up from ¥10.

In addition to postal savings and insurance policies, some post offices may sell products offered by other private insurers and sell daily goods.

One of the four new firms, Japan Post Network Co., in charge of managing counter services at 24,000 post offices nationwide, plans to sell car accident and cancer insurance policies at post offices in Tokyo and surrounding areas.

Japan Post Bank has taken over all ordinary postal savings accounts from Japan Post, which had been the world’s biggest financial institution, with more than ¥300 trillion in assets in the form of postal savings and insurance contracts.

The new bank can no longer promise a government guarantee for repayment of all deposits.

Instead, Japan Post Bank, like other private-sector banks, has joined the government-backed deposit insurance system, under which repayments of up to ¥10 million in principal plus interest are guaranteed per depositor.

Fixed-amount and installment postal savings accounts opened before the start of privatization were transferred to a newly created government-backed entity, with their repayments fully guaranteed.

The agency has also taken over all postal insurance contracts concluded before the start of privatization. The guarantee for payments of insurance money under those contracts will remain until they mature or are canceled.

Aside from these changes, some analysts say, a crucial change is occurring concerning how individual investors should think about measures to manage their assets.

Japan Post had attracted a huge amount of money as investors had considered it the safest financial institution in Japan, with repayment guaranteed by the government.

Conservative investors had almost blindly turned to their local post offices for a place where their money could be kept safely, analysts say.

The huge network of post offices was also helpful in soliciting depositors and insurance policyholders in less-populated rural areas.

Now that the government assurances have been eliminated, “people will increasingly be required to think more seriously about asset management,” said Nobutomo Watanabe, senior economist at Norinchukin Research Institute.

The long route to postal privatization

Following is a history of the postal system and events related to its privatization:

1871 — Japan’s modern postal system, modeled on Britain’s, starts with service between Tokyo and Osaka.